Correlation Between ETFS ROBO and ETFS SP

Can any of the company-specific risk be diversified away by investing in both ETFS ROBO and ETFS SP at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ETFS ROBO and ETFS SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETFS ROBO Global and ETFS SP Biotech, you can compare the effects of market volatilities on ETFS ROBO and ETFS SP and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ETFS ROBO with a short position of ETFS SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS ROBO and ETFS SP.

Diversification Opportunities for ETFS ROBO and ETFS SP

0.76

Correlation Coefficient

ETFS ROBO  ETFS SP

Poor diversification

The 3 months correlation between ETFS and ETFS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ETFS ROBO Global and ETFS SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS SP Biotech and ETFS ROBO is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ETFS ROBO Global are associated (or correlated) with ETFS SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS SP Biotech has no effect on the direction of ETFS ROBO i.e., ETFS ROBO and ETFS SP go up and down completely randomly.

Pair Corralation between ETFS ROBO and ETFS SP

Assuming the 90 days trading horizon ETFS ROBO Global is expected to under-perform the ETFS SP. But the etf apears to be less risky and, when comparing its historical volatility, ETFS ROBO Global is 1.21 times less risky than ETFS SP. The etf trades about -0.09 of its potential returns per unit of risk. The ETFS SP Biotech is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  4,965  in ETFS SP Biotech on December 29, 2024 and sell it today you would lose (330.00) from holding ETFS SP Biotech or give up 6.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ETFS ROBO Global  vs.  ETFS SP Biotech

ETFS ROBO Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS ROBO Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

ETFS SP Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS SP Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with ETFS ROBO and ETFS SP

The main advantage of trading using opposite ETFS ROBO and ETFS SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS ROBO position performs unexpectedly, ETFS SP can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ETFS SP will offset losses from the drop in ETFS SP's long position.

The idea behind ETFS ROBO Global and ETFS SP Biotech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.